Rs200b unpaid ST refunds cut industry to bone

PTEA flays Dar for reneging on promise

FAISALABAD-The Pakistan Textile Exporters Association (PTEA) has expressed grave concerns over the undue delay in the payment of sales tax (ST) refunds despite firm commitment of the government in the budget 2017-18.

The delay in refunds has unfortunately been accumulated to over Rs200 billion and been adversely affecting the cash flow of exporters, said Pakistan Textile Exporters Association Chairman Ajmal Farooq said. He added that Finance Minister Ishaq Dar had announced during his budget speech that all the pending sales tax refunds whose refund payment orders (RPOs) have been sanctioned by April 30, 2017 shall be paid in two parts. RPOs up to the value of Rs1 million will be paid till July 15, and the remaining will be paid till August 14, 2017, he remembered. Unfortunately, he said, on ground nothing has yet been done in this regard and textile exporters are still deprived of their basic working capital blocked in refund regime.

Expressing disappointment over non serious attitude, he said that the government has released only Rs3 billion for payment of drawback of taxes under Prime Minister’s package in six months against the requirement of Rs7.29 billion per month. Furthermore, Rs4 billion only are been earmarked against the Rs180 billion under PM’s package in federal budget, besides holding drawbacks, sales tax and custom rebate refund claims of Rs200 billion, creating serious liquidity crunch for the textile industry, negatively affecting production capacity and resulting in ultimate decline in the exports, he said.

He stressed for immediate payment of all outstanding refunds for which RPOs have been issued and unprocessed refund claims be processed to improve the liquidity of the textile industry. He said that finance is imperative to run the wheels of industry but without this, no one could even think to run the industry. Government should set its priorities right and accord preferential treatment to boost the exports and generate industrial activities, he said.

The PTEA chief was of the view that due to high input cost including energy prices, Pakistani textiles are no more competitive in the international market and instead of making announcements only, Government should take practical measures to arrest the falling exports. He said that gas, the major production element in textile manufacturing, is available at around Rs1,000/MMBTU in Pakistan against Rs 400 in Bangladesh. Similarly electricity tariff for industry is Rs10.5/kwh; whereas it is Rs7/kwh in other regional countries including Bangladesh.

Furthermore, the industry is burdened with Rs3.63/kwh surcharges on electricity and GIDC on gas which cannot be passed on to international buyers, he said. He added that with such high prices of energy, textile industry is unable to compete in the international market.

The PTEA vice chairman said that high production cost and stuck up liquidity have played a vital role in the negative growth in exports. Drop in exports and the health of textile sector is being taken up by PTEA at various forums but the government does not understand the gravity of the matter and no remedial measures are taken to ratify the situation. “Resultantly, not only exports of the country dropped but we are also losing our hard earned export markets,” he said.

He added that potential investors are reluctant to undertake investment decisions under the prevailing situation. This is having adverse impact on the employment and the economy of the country. Undue delay in release of huge funds that runs into billions had triggered serious liquidity crunch for cash starved textile exporters and manufacturers that lead to reduction of industrial activities. Government should pay all outstanding refunds in accordance with its commitments, he demanded.